Orkla India Ltd.

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By Nitin Negandhi

Orkla India Ltd.

Is OFS to attract FMCG major ?

Orkla India Ltd. (OIL), a subsidiary of Norwegian conglomerate Orkla ASA, owns well-known brands such as MTR, Rasoi Magic, and Eastern. The company has a diverse portfolio of packaged foods, including spices, ready-to-eat meals, sweets, and breakfast mixes. Orkla acquired the Eastern brand from its Indian promoters in 2020 for Rs.1,350 crore.

Orkla ASA currently holds a 90% stake in the company and is now offering an Offer for Sale (OFS) of 2.28 crore equity shares. The other two promoters, Navas Meeran and Feroz Meeran, each hold a 5% stake. Post-OFS, the foreign shareholder will retain a little over 75% of the company’s equity, while the two individual promoters will hold 4% each.

OFS details:

Orkla India’s products are marketed domestically and exported to countries such as the USA, UK, Australia, and Japan with exports contributing around 20% of total revenue. The domestic market, which contributes the remaining 80%, is supported by the strong growth of India’s packaged food sector, expanding at an annual rate of 11% with urban areas accounting for over two-thirds of demand.

In the spices segment, its flagship products include Sambar Masala and Rasam Masala while the convenience foods portfolio includes Rava Idli Mix, 3-Minute Poha, Dosa Mix and Gulab Jamun Mix. Spices account for 66.6% of total revenue, with the remaining contribution coming from convenience foods. The company operates nine manufacturing plants located across India.

Financial Performance:

The company recorded moderate growth of 5% between FY23 and FY25, with revenue rising from Rs.2,172 crore to Rs.2,395 crore. Net profit declined from Rs.339 crore to Rs.256 crore during this period, primarily due to deferred tax adjustments in FY23. However, other income doubled to Rs.60 crore and operational performance before tax adjustment improved due to a better product mix and effective cost control. EBITDA margins rose from 14.2% in FY22 to 16.6% in FY25.

Orkla India benefits from an extensive and well-established distribution network. Revenue from general trade channels has remained steady at around Rs.1,500 crore since FY23, while e-commerce and quick commerce revenues doubled from Rs.70 crore to Rs.140 crore. The company allocates approximately 5% of its revenue toward advertising and sales promotion.

Material costs declined from 58.4% in FY23 to 55.2% in FY25, aided by soft commodity prices. Within the spice segment, chillies account for nearly one-third of total raw material costs, followed by turmeric and coriander. A bumper crop in 2024–2025 led to a 28% drop in chilli prices. Edible oil remains another key cost component. However, the company’s high dependency on commodity-linked inputs continues to pose structural risks due to raw material price volatility.

For the quarter ended 30^th June 2025, Orkla India reported a 6% growth in revenue and a 10% rise in net profit, from Rs.72 crore to Rs.79 crore. The company remains debt-free with surplus cash and investments amounting to Rs.300 crore as of the same date.

Financial Performance:                        (Rs. in crore)

Orkla India operates in a highly competitive environment, facing strong rivalry from both domestic spice majors such as Everest Masala, Tata Consumer Products Ltd. (TCPL) and Dabur (Badshah Masala), as well as multinational FMCG giants like ITC. Among its peers, Tata Consumer Products Ltd. is the only listed company directly comparable in the packaged foods and spices segment while ITC Foods operates as a division of the listed ITC Ltd

Peer Comparison FY25:

Tata Consumer’s balance sheet includes blue-chip investments such as Tata Investment Corporation, Tata Sons and Tata Starbucks, making it structurally distinct and not directly comparable with Orkla India. Meanwhile, ITC has been actively looking to strengthen its presence in the South Indian food market, particularly in the spices and ready-to-cook categories. Reports in early 2025 suggested that ITC was exploring the acquisition of one or more brands owned by Orkla to expand its footprint in these fast-growing segments.

As per market grapevine and media reports in leading financial dailies, ITC had shown interest in acquiring a stake in Orkla India at a valuation of around Rs.12,000 crore for a 100% holding. However, Orkla ASA, known for managing globally recognised brands through professional management teams, denied the possibility of any such development and declined to comment on the matter.

At the upper end of the OFS price band of Rs.730 per share, Orkla India is valued at around Rs.10,000 crore, translating to approximately 4x its annual revenue. By comparison, Tata Consumer’s recent acquisitions and Dabur’s valuation of Badshah Masala were both around 4.5x revenue, suggesting that Orkla’s valuation is reasonable.

The issue appears fairly priced, and the potential of future equity stake interest from large FMCG corporates may keep investor sentiment positive toward the stock. The grey market indicates a likely listing range of Rs.800 to Rs.850, compared to the OFS issue price of Rs.730.

Disclaimer:

The writer is not a SEBI-registered analyst. He and his associates may or may not participate in the IPO. This write-up is intended solely for educational purposes. Investors are advised to consult their financial advisors before making investment decisions. The grey market premium is merely indicative and should not be relied upon for investment guidance.